Casino licensing is a complicated game

Posted: January 28, 2014

Speculation about who could win Philadelphia's second gaming license is certain to pick up with the start Tuesday of three days of hearings before the Pennsylvania gaming commission.

But what if no one wins?

It's a nagging question privately making the rounds in political and business circles.

State gaming law reserves two licenses for Philadelphia. But people familiar with the selection say a stalemate stemming from a mix of economic and political factors could interrupt the process.

State law requires the four commissioners who were appointed by the General Assembly - two by Republicans and two by Democrats - to support the same project. Of the remaining three commissioners, selected by the governor, at least one has to concur to form a "qualified majority."

After the suitability hearings conclude this week, the matter will be placed on the board's monthly agenda, leading to closed-door deliberations during the executive session of commissioners. Once there is a consensus, the license will be voted on during the public session.

But that could take many months, said Doug Harbach, a spokesman for the Pennsylvania Gaming Control Board.

The board does not have a deadline, he said. In 2006, the last time the state awarded licenses in Philadelphia, it took about two months after the suitability hearings for the board to decide.

But no consensus, no vote.

The voting mechanism "can be an extra hurdle in reaching this qualified vote," Harbach said.

Beginning Tuesday at the Convention Center, each of the five groups vying for the license will have 90 minutes to make final pitches to the seven commissioners. After each presentation, board members will be able to drill down on the details, asking about everything from financing to development plans.

Five groups have applied for the license. Two projects - the Provence and Market8 - would be situated in Center City, with the other three - Casino Revolution, Hollywood Casino Philadelphia, and Live! Hotel & Casino - proposed for South Philadelphia.

Industry experts say the gaming board could decide that none of the applicants is suitable or that issuing a license would not be in the best interest of the state if it harms the gambling industry, a major generator of tax revenue.

Such a decision, they add, would be difficult, given that serious, experienced applicants would like to build the city's second casino.

Guy S. Michael, a gaming lawyer in Atlantic City, said commissioners in Pennsylvania have a great deal of discretion and latitude.

He said they could come up with a justification for not issuing a license now, based on current circumstances. But, he added, "That doesn't mean that you are foreclosing on the issuing of a second license in the future."

Thomas A. Decker, a former chairman of the Pennsylvania gaming board, said commissioners cannot decide not to issue a license. That authority rests with General Assembly, which legalized gambling in 2004 and stipulated that Philadelphia would be entitled to two licenses.

"It's possible they could postpone, but they really can't say they will not issue another license because the statute mandates that," Decker said. "Someone could sue the board and go to court to say you must issue a license."

SugarHouse Casino has stepped into the fray. The city's first casino is being allowed by the gaming board to intervene in the process and voice its objections to a second casino. It warns that the local market cannot handle another casino because of the explosion in regional gambling. Harrah's Philadelphia, in Chester, concurs.

Some minority investors in SugarHouse have gone to court to stop the board from awarding another license. These investors assert in Commonwealth Court that the board lacks authority to reissue the second license, after revoking the original license it awarded to the Foxwoods group in 2010. The matter is pending.

To be sure, the regional casino business has changed dramatically since the Pennsylvania General Assembly legalized gambling in 2004. Then, the main competitors were established operators in Atlantic City and scattered tribal casinos in New York and Connecticut.

After six straight years of strong growth, Pennsylvania's gambling revenue fell 1.4 percent last year, to $3.11 billion. Locally, combined revenue at Parx, SugarHouse, and Harrah's Philadelphia fell 4 percent, to $1.06 billion. Valley Forge Casino did not open until March 2012, skewing the year-to-year comparison.

Today, all the states surrounding Pennsylvania are rolling out casinos. Most recently, New York voters approved an expansion in gaming, and Massachusetts is selecting its first gambling establishments.

The economic effect of another casino on existing casinos "is certainly being looked at by the board," Harbach said.

Pennsylvania has 12 casinos, including four in the Philadelphia area: SugarHouse, Parx, Harrah's, and Valley Forge.

Harbach said the board had never faced a stalemate over a license. But there have been protracted deliberations. When the Nemacolin Resort in southwestern Pennsylvania won a license, the matter was placed on the board's agenda four months in a row before it came to a vote.

"At this juncture," Harbach said, "they are clearly looking at licensing another casino in Philadelphia per the Gaming Act."


jlin@phillynews.com

215-854-5659 @j_linq

www.inquirer.com/doubledown

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